[EN] Sem Lance

Lance Crosby, Head of IBM’s Cloud Business SoftLayer, Is Out
January 28, 2015, 5:30 AM PST

Arik Hesseldahl

Lance Crosby, CEO of SoftLayer, the cloud services company that IBM acquired in mid-2013 and which now forms the backbone of its cloud services business unit, has left Big Blue, sources familiar with the move tell Re/code.

Crosby, 44, who ran Dallas-based SoftLayer for eight years as a privately held company, stayed on for about 19 months after IBM agreed to pay about $2 billion for it. Crosby’s last day at IBM will be Thursday or Friday, sources said, and a replacement has not been named.

IBM confirmed the move in a statement: “We wish Lance Crosby the best as he takes a well deserved break before pursuing new endeavors. Lance has left his mark on IBM. SoftLayer has become an important part of IBM’s cloud portfolio, and has played a big role in our success.”

Crosby also issued a statement via IBM: “I am very proud of the business we built and the team who continue to evolve SoftLayer at IBM. Now that the business is successfully integrated into IBM, I am ready to take some time off before I pursue my next challenge.”

His departure follows the promotion of Robert LeBlanc, an IBM veteran with three decades at Big Blue under his belt, to run a newly formed cloud business unit.

IBM’s acquisition put the SoftLayer brand at the center of a strategy that CEO Ginni Rometty is leading to try and transform the company into a significant player both in cloud services and in software delivered via the cloud. Within weeks of closing the deal, Big Blue had retired its own fledgling Smart Cloud brand. And as Crosby told me in a 2013 interview, more than 1,000 new customers walked through SoftLayer’s door in the first 90 days after the deal closed.

IBM now refers to its cloud business as one of its “strategic objectives” and has been hitting one aggressive goal after another in building it up. One goal was to break $7 billion in annual cloud revenue by 2015, surpassed last week when it said it hit $7.7 billion in combined cloud services and software revenue, amounting to about 8 percent of the IBM’s 2014 sales. Of that, about $3.5 billion is SoftLayer’s services business.

Another IBM goal was the worldwide expansion of its cloud business in a more physical sense. Last year, it said it would spend $1.2 billion to expand its global footprint of data centers from 13 to 27. After cutting a deal with Equinix, a data center company, the company upped the goal to 49.

It’s a far cry from the company that started in Crosby’s living room back in 2005. By 2013 it had 21,000 customers and a global footprint spanning the U.S., Asia and Europe. Even so, it was much smaller than Amazon Web Services; the industry’s big gorilla was easily outrunning it, and everyone else — including IBM.

When I first met Crosby in New York in 2012, he let slip that he was in town for a round of meetings with investment bankers and contemplating an initial public offering, though at the time he didn’t strike me as the CEO of an IPO-bound startup.

There was a reason for that: Small cloud players were getting gobbled up by larger companies. Verizon had spent $1.4 billion on Terremark; CenturyLink dropped $2.5 billion on Savvis. And there were constant M&A rumors about Rackspace, a Texas-based cloud outfit like SoftLayer.

Crosby and his investors at GI Partners, a private equity firm in Palo Alto, Calif. opted instead to shop SoftLayer around, and according to a Bloomberg report attracted interest from as many as 36 different suitors. They narrowed that list down to six and Rometty herself closed the deal in a one-on-one meeting with Crosby.

By “my next challenge,” Crosby probably means starting another company, people who know him say. “He’s a serial entrepreneur. He likes to build things,” one source said.

The Man Behind IBM’s Cloud-Based Campaign

Robert LeBlanc has taken on big jobs before. In the late 1990s, when the Internet was picking up steam at many companies, he played a key role in a heavily advertised “e-business” push that helped connect traditional back-end systems to the Web.

By Don Clark
Jan. 26, 2015 4:19 p.m. ET

Facing an uphill battle to boost revenue, International Business Machines Corp. is mounting a high-stakes campaign to become a top player in cloud services. Now that push has a new point man.

Robert LeBlanc, a 33-year Big Blue veteran, was named the leader of a new dedicated cloud unit in early January. He reports directly to CEO Virginia Rometty , overseeing cloud-related businesses that IBM says are generating about $7 billion in annual revenue—a target the company reached a year earlier than it expected—and growing at a 60% clip.

That’s still only about 7.5% of the $92.8 billion in annual revenue IBM reported last week. The announcement underscored the fact that the company’s older software and services businesses remain considerably bigger—and in a tailspin.

“For now, the fall-off in the traditional businesses is dwarfing IBM’s ability to capture new revenue opportunities as the market shifts,” wrote Toni Sacconaghi, an analyst at Sanford C. Bernstein, in a note following IBM’s announcement.

Mr. LeBlanc, 56 years old, acknowledged that IBM must move fast to make the cloud pay off—something his new position was designed to help accomplish. “We want to continue to drive for speed,” he said in an interview.

He has taken on big jobs before. In the late 1990s, when the Internet was picking up steam at many companies, he played a key role in a heavily advertised “e-business” push that helped connect traditional back-end systems to the Web.

IBM’s cloud push comprises a few dissimilar activities. One is software as a service, a term that refers to programs that once would have been installed on customer computers but now are served up over the Web. Martin Schroeter, IBM’s chief financial officer, said software as a service contributed nearly $3.5 billion the company’s roughly $7 billion in annual revenue from the cloud. The best-known provider of online software is Salesforce.com Inc., whose revenue for the year ending January 31 is projected by analysts at $5.4 billion.

A large portion of IBM’s remaining $3.5 billion cloud revenue comes from data centers that run customers’ own applications, a business known as infrastructure as a service, based on the $2 billion acquisition of SoftLayer in 2013. By comparison, Amazon.com Inc.’s competing AWS division may post nearly $6 billion in revenue in 2015, up from $4.3 billion in 2014, predicts Piper Jaffray analyst Gene Munster.

Mr. LeBlanc, a senior vice president, previously led a group that included the cloud-based software offerings—which the company says number over 100— as well as leading its conventional software businesses. He also supervised Bluemix, a set of tools to help programmers build Web and mobile applications.

Now he also oversees the former SoftLayer unit, which is trying to differentiate itself with a global network that spans 49 data centers and counting. In addition to new Softlayer operations in Frankfurt, Mexico City and Tokyo, IBM in December announced plans to work with data-center operator Equinix Inc. to offer additional facilities in Australia, France, Japan, Singapore, the Netherlands and the US. It has also cut deals with Germany’s SAP SE and China’s Tencent Holdings Ltd. to create additional cloud offerings.

Mr. LeBlanc aims to serve customers who want to run applications on their own computers and outsource others—an arrangement called a hybrid cloud —while also serving customers in countries like Germany who want to keep their applications and data nearby because of security worries and local data sovereignty laws.

“That whole distributed data center model is really playing well with a lot of clients,” Mr. LeBlanc says. “They do worry about where the application is running.”

The company has unleashed a stream of cloud-related announcements, some with sizeable dollar values. Last week, for example, IBM said the health-care company Anthem Inc. agreed to pay nearly $500 million over five years for services that would help Anthem integrate its apps delivered via the cloud with those run in its own facilities.

Such deals, however, don’t necessarily provide a short-term boost to IBM’s income statement. Where sales of conventional on-site software are recorded as revenue up front, portions of revenue from software delivered online and other cloud services are booked gradually, often on a monthly basis.

Mr. LeBlanc acknowledges that keeping pace with rivals will require the 103-year-old company to develop new skills. Part of the solution is expected to come from hiring; he estimates the cloud group has 1,000 job openings.

Steven Milunovich, an analyst at UBS Securities, says investors are trying to figure out whether IBM stands to gain more by moving its customers to the cloud than it will lose in on-site software licensing. The company does have advantages, he said, particularly a base of customers who run IBM mainframes or other hardware.

Though IBM’s brand in the cloud lags that of some rivals, Mr. Milunovich said, the company appears to be ahead of some other competitors. “I would give them at least a solid B for their efforts,” he said.

It’s official now: SoftLayer’s Lance Crosby exits IBM

By Barb Darrow
Jan. 28, 2015 - 8:03 AM PST

The writing was on the wall when IBM named another guy to head up its cloud operations, but now it’s apparently official: Lance Crosby, the CEO of SoftLayer, which IBM acquired in July 2013 for $2.2 billion, is leaving the company.

Most had expected SoftLayer’s top guy — who was initially named GM of all of IBM’s Cloud business — to stick around till the two-year anniversary of the deal, but such was not to be.

IBM confirmed Crosby’s resignation to eWeek which first reported the news early on Wednesday. In a statement an IBM spokesman wished Crosby the best in his new endeavors and thanked him for his efforts.

Others at and near to the company said Crosby had designs on keeping the top cloud job but was thwarted when IBM named long-timer Robert Leblanc top cloud exec.

LeBlanc is widely respected, but as noted here last week, the notion of someone who’s spent nearly 30 years at IBM leading its all-important cloud charge is not great news for those who see the need for fresh blood to lead this key business.

Speaking of SoftLayer, Lance Crosby, who retained his CEO title when SoftLayer was acquired by IBM two years ago for $2.2 billion, is now general manager of cloud innovation and business development at IBM. Meanwhile Robert LeBlanc, who joined IBM in 1981, is now the official cloud guy, aka SVP of Cloud — so those hoping for an outsider perspective to guide IBM’s cloud may be disappointed.

The SoftLayer acquisition gave IBM some cloud mojo it sorely lacked up till then. Big Blue, built on sales of hardware, software and services to large companies lagged far behind public cloud leader Amazon Web Services, which dominates in the startup segment but started an enterprise push three or so years ago.

The notion that security- and compliance-sensitive customers would automatically default to IBM cloud solutions was decimated in early 2013 when the CIA opted to use Amazon’s cloud over IBM’s, even though Amazon bid a higher price. The $2 billion SoftLayer buy was seen as a response to that direct threat.

To see how Crosby viewed IBM’s cloud game plan, check out the video of his Structure 2014 appearance below.

IBM's SoftLayer chief departs amid cloud transition

For the last quarter ended in December, IBM’s revenue was down 12 percent from a year earlier to $24.1 billion, while profit fell 11 percent.

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Rivals Oracle and SAP have generally viewed cloud infrastructure as a commodity, focussing more on middleware and applications instead. But IBM has placed its own emphasis largely on the infrastructure layer, with the addition of services to set itself apart from Amazon, said analyst Robert Mahowald, a vice president for SaaS and cloud software with IDC.

“IBM is making a bet and taking the stance that infrastructure really matters,” he said. “It remains to be seen who is right.”

Crosby, meanwhile, “did a great job of growing SoftLayer’s software and making it attractive to IBM,” he added.

His departure is no real surprise, Mahowald said, noting that in meetings, Jim Comfort, IBM’s general manager for GTS cloud development and delivery, has been IBM’s main “go-to guy” for cloud.

“I think it has been in the works for a while,” Mahowald said. “It seems to me that when you’re the CEO of an acquired company, there’s the expectation of either being elevated or hanging around for 24 months and then exiting quietly. I think Crosby is just doing his duty.”